Market Roundup
• Fed holds rate steady in 8-2 vote, Rosengren back to majority; George & Mester dissent.
• Fed: case for hiking has continued to strengthen, waiting for “some” further evidence of progress toward objectives before hiking.
• Fed drops reference to inflation expected to stay low in “near-term” repeats view inflation to rise to 2% target over med-term.
• US private sector (ADP) adds 147k jobs in Oct, vs 202k (revised from 154k) in Sep.
• UK construction growth hits 7-month high, but outlook darkens -PMI.
• Crude stocks jump 14 mln barrels – EIA, oil dips 2.5%.
• Euro Zone October factory growth near three-year high- PMI.
• China debt risks stoke internal debate over lowering ‘17 growth goal, China to meet to map up 2017 growth, reform agendas.
• Kuroda dismisses idea of BOJ buying municipal bonds, Inflation not completely a monetary phenomenon.
Looking Ahead - Economic Data (GMT)
• 22:30 Australia AIG Services Index Oct 48.9-previous
• 00:30 Australia Trade Balance G&S (A$)* Sep forecast -1700m, -2010m-previous
• 01:45 China Caixin Services PMI Oct 52.00 –previous
Looking Ahead - Events, Other Releases (GMT)
• No Significant Events
Currency Summaries
EUR/USD is likely to find support at 1.1058 levels and currently trading at 1.1091 levels. The pair has made session high at 1.1117 and hit lows at 1.1182 levels. Euro rose against the dollar on Wednesday as uncertainty over the outcome of the U.S. election weakened the dollar, but euro pared gains slightly after the Federal Reserve held interest rates steady as expected. The Fed kept interest rates unchanged during its two-day policy-setting meeting which ended on Wednesday, ahead of the Nov. 8 U.S. election, but indicated a December hike was possible as the economy gathers momentum and inflation picks up. Already high expectations of a December rate hike gave the U.S. central bank room to not explicitly signal an upcoming rate hike as it awaits more data before the December meeting, including two more monthly employment reports. The dollar index, which measures the greenback against a basket of six major rivals, fell about 0.4 percent to 97.26, its lowest since Oct. 11. The euro rose about 0.6 percent against the dollar to $1.1115, its highest since Oct. 11.
GBP/USD is supported in the range of 1.2220 and currently trading at 1.2291 levels. It reached session high at 1.2335 and hit low at 1.2275 levels. Sterling jumped to its highest in three weeks against the dollar on Wednesday, as investors sold the greenback on worries that Donald Trump could win the U.S. presidential election next week. With opinion polls narrowing, investors are rethinking long-held bets on a Nov. 8 victory for Democrat Hillary Clinton. They worry a Trump victory could delay the rise in U.S. interest rates they expect the Federal Reserve to deliver in December, which would weaken the dollar. Sterling hit as high as $1.2355 earlier in the day after Prime Minister Theresa May's said government would do its best to secure a good deal for the agriculture sector when Britain leaves the EU, during her weekly questions from parliament. The BoE will announce its latest policy decision and quarterly inflation report on Thursday. Sterling's fall almost 20 percent since the vote for Brexit is expected to push the BoE to raise its inflation forecasts to show a bigger overshoot of its price target than at any time since it gained independence in 1997.
USD/CAD is supported at 1.3360 levels and is trading at 1.3390 levels. It has made session high at 1.3425 and lows at 1.3360 levels. The Canadian dollar strengthened against its U.S. counterpart on Wednesday despite lower oil prices as U.S. election uncertainty weighted on the greenback. The U.S. dollar fell against a basket of major currencies as investors were concerned by growing signs that U.S. election is headed for close battle on the Nov. 8 vote. Oil prices tumbled 3 percent on Wednesday after a record weekly build in U.S. crude inventories stoked investor worries about a global supply glut. The U.S. Energy Information Administration (EIA) said crude inventories rose 14.4 million barrels for the week ended Oct. 28, far more than the 1.0 million barrels analysts had expected. It was the biggest weekly rise in U.S. crude stocks since records began in 1982, and exceeded the American Petroleum Institute's report on Tuesday of a 9.3 million-barrel build. The Canadian dollar was last trading at C$1.3375 to the greenback, or 74.77 U.S. cents, stronger than Tuesday's close of C$1.3393, or 74.67 U.S. cents.
USD/JPY is supported around 102.80 levels and currently trading at 104.41 levels. It peaked to hit session high at 103.48 and made session lows at 103.00 levels. Japanese yen strengthened against US dollar on Wednesday as demand for safe haven assets increased after as investors were rattled by signs the U.S. presidential race was tightening just days before the vote. Investors were beginning to rethink their long-held bets of a Nov. 8 victory for Democratic candidate Hillary Clinton amid signs her Republican rival Donald Trump could be closing the gap, deepening the recent decline across major stock markets. Markets' assumption in the past month has been that the dollar would fall if Trump won. Clinton is viewed as the candidate of the status quo, while there is greater uncertainty over what a Trump victory might mean for U.S. foreign policy, international trade and the domestic economy. The U.S. dollar fell against the euro, yen, Swiss franc and sterling on continued nervousness about the outcome of the election.
Equities Recap
European shares fell for the eighth straight day on Wednesday, driven downward by signs of a tightening race for the U.S. presidency next week and a drop in A.P. Moller-Maersk after disappointing results.
UK's benchmark FTSE 100 closed down by 0.4 percent, the pan-European FTSEurofirst 300 ended the day down by 1.15 percent, Germany's Dax ended down by 1.4 percent, France’s CAC finished the day down by 1.1 percent.
Wall Street stayed weak on Wednesday after the Federal Reserve kept interest rates unchanged but signaled it could hike in December, as equities remained pressured by uncertainty over the impending U.S. elections.
Dow Jones closed down by 0.41 percent, S&P 500 ended up by 0.64 percent, Nasdaq finished the day up by 0.92 percent.
Treasuries Recap
U.S. Treasury yields fell to their lowest in a week on Wednesday as uncertainty ahead of next week's U.S. presidential election enhanced the appeal of safe-haven bonds, and the Federal Reserve did not commit to an imminent interest rate hike.
Benchmark 10-year notes ended up 7/32 in price to yield 1.80 percent, down from 1.82 percent late Tuesday.
Commodities Recap
Gold rallied to a one-month high on Wednesday, as uncertainty over the outcome of the U.S. election knocked stocks and the dollar lower, but bullion pared gains slightly after the Federal Reserve held interest rates steady as expected.
Spot gold rose to $1,307.76 an ounce, its highest since Oct. 4, and was up 1.05 percent at $1,301.36 by 3:05 p.m. EDT (1905 GMT). U.S. gold futures for December delivery settled up 1.6 percent at $1,308.20 per ounce.
Oil prices tumbled 3 percent on Wednesday after a record weekly build in U.S. crude inventories stoked investor worries about a global supply glut, days after analysts estimated higher monthly OPEC crude output.
U.S. West Texas Intermediate (WTI) crude settled down by $1.33, or 2.9 percent, at $45.34 a barrel. It broke the $45 support earlier, sinking to a five-week low of $44.96.
Brent fell $1.28, or 2.7 percent, to settle at $46.86, after sliding to $46.46, its lowest since Sept. 28.
